Corporations and limited liability companies (LLCs) are the most common types of business entities. Both allow for flexibility in management and governance, and both provide limited liability for the owners.
But many business owners are unaware that, if they make certain mistakes, they can forfeit their liability protection and expose themselves to personal liability for the company’s debts and conduct.
The law calls this theory “piercing the veil” to create “alter ego” liability. Essentially, in a lawsuit against a corporation or LLC, a court may pierce through the “veil” of the legal entity to reach owners that it deems are the “alter egos” of the entity.